Consumer premiums and incentives, long criticized by advertising executives for eroding brand loyalty, have gained the cautious respect of marketers willing to apply some discipline to the planning of short-term promotions.

Premiums and incentives, those items given away or offered at cost with the purchase of a product, encompass everything from low-cost ‘trinkets and trash’ to big-ticket items such as tvs, vcrs, camping gear and travel.

Enhance brand

Faced with an infinite variety of choices, the issue for marketers is not so much what items are available, but which items will enhance the identity of the brand, complement the image of the company and will be consistent with the company’s overall marketing plan.

Poor reputation

Robert Clarkson, vice-president and general manager of sales promotion firm Promo Marketing Canada, a division of Carlson Marketing Group International with offices in Toronto and Montreal, says premiums and incentives developed a poor reputation during the 1980s when recession-weary companies, desperate to boost sagging quarterly profits, offered consumers anything and everything to encourage them to buy.

‘What senior managers found, particularly in the petroleum industry, for example, was that they were spending inordinate amounts of money to move a big bulge of consumers from one company to another, depending on what was being given away for free,’ Clarkson says.

‘It might be glasses one week at Petro Canada, a book at Shell, a sticker collection for hockey players at Esso,’ he says. ‘It was very costly, and it didn’t do anything to build anybody’s business.’

Clarkson says in the desire to provide value-added incentives to consumers, some companies neglected a lot of other factors that affected the long-term health of their business.

‘Promotions came to be relied upon in the wrong way,’ he says.

‘You get into this discussion where advertising people claim promotion is detrimental to the brand. It shouldn’t be. It should be quite the opposite, but it can happen if one area of the marketing mix is relied upon too heavily.’

Hardened by their initial experience with short-term promotions, many marketers began to re-evaluate their use of premiums and incentives, Clarkson says.

Sophisticated

‘Companies are no longer running a premium program just because their competition is doing it,’ he says. ‘They are becoming far more sophisticated in their approach.’

Stacia Rubinovich, marketing manager at Toronto-based Hershey Canada, says like many other marketers, the confectionery company has become more selective in its use of premiums and incentives over the past couple of years.

Appropriate?

‘We’re asking ourselves, `Is a premium appropriate in this case? Is sampling more appropriate, or couponing more appropriate, or do we need an incentive at all?’ ‘ Rubinovich says.

‘A number of years ago, marketers were so enthralled with a neat tie-in, they spent money that didn’t need to be spent,’ she says.

‘Now we look at our objectives and ask, `Is a premium really fulfilling that objective?’ ‘

Clarkson agrees that up-front planning is key to the success of any promotion.

‘The most important element that comes to mind in any kind of consumer premium initiative is understanding exactly what your business objectives are,’ he says.

‘And I’m talking quantitative and qualitative. Often people don’t put those measures in place, so you’ll never know if you’re successful or not.’

Rubinovich says at Hershey, the choice of premium or incentive depends largely on the objectives for a specific brand.

‘For some brands that are relatively new, we’re interested in generating trial,’ she says. ‘On a well-established brand like Planters, we might want to encourage multiple purchase,’ she says.

As Rubinovich explains:

‘With something like soap or detergent, if you buy two boxes, you’re not going to wash your clothes any more often. But if you buy two jars of peanuts, you’re just going to eat more peanuts, it’s not going to stay in the house twice as long.’

She says Hershey spends about 12% of its marketing budget on consumer promotion, including premiums and incentives, point-of-sale material and coupon redemption.

‘It really makes sense for us to get those impulse purchases, because if it’s in the house, it’s going to be consumed.’

Hershey employs two agencies, The Promotion Solutions Group and The Torsney Group, to pitch ideas and source materials.

Mascot

Recent promotions for Planters have capitalized on the popularity of the brand mascot, Mr. Peanut.

Rubinovich says point-of-sale prize merchandise has included a Mr. Peanut punching bag, and a Mr. Peanut plug-in sign, calculated to add interest to a display and, once the promotion is over, provide an in-home reminder of the brand.

Earlier this year, the company mounted a three-month promotion for its Eat-More candy bar in which consumers could enter a contest to win Coleman camping gear.

Rubinovich says the promotion made sense because Eat-More is positioned as an ‘outdoor’ type of bar.

Lynn Kelley, brand manager at Nestle Canada, says her company recently offered consumers a clear plastic pitcher with the purchase of its Nestea brand iced tea mix, specifically to address the issue of frequency of use.

‘We have statistics that show there was a higher consumption rate if [the product] was ready-made in your fridge,’ Kelley says.

‘So giving away a pitcher made perfect sense, given the objectives of the brand this season,’ she says.

The company is also hoping the logo-identified pitcher will build brand loyalty, now that competitor Lyons Tetley Canada has introduced its own brand of iced tea crystals.

In addition, Nestle provided retailers with Nestea ‘display activators,’ large branded items such as patio umbrellas, patio chairs, and, two years ago, inflatable rafts.

Kelley says these items, offered to consumers as prizes in in-store draws, fulfill several objectives.

She says they generate in-store displays, and because each item is something the consumer associates with summer fun, they reinforce the seasonal nature of the product.

‘It gets down to integrated marketing. Everything you do or say should be consistent.’

Bonnie Shore, vice-president and director of marketing at women’s fashion retailer Fairweather, says premiums and incentives of an ‘aspirational’ nature weigh heavily in the company’s marketing budget.

‘It’s supposed to be an `indulge yourself’ kind of thing, that complements Fairweather’s unique shopping environment,’ says Shore, who adds the use of premiums and incentives in the retail trade is new to Canada.

In the past 18 months, the company has offered its customers the chance to buy a variety of items at cost with a certain minimum purchase.

This fall, purchase-with-purchase promotions will include a hard-sided tartan train case for $25 with a $50 purchase, and a bath collection for $10 with a $50 purchase.

Shore says each custom-made item is discreetly branded with the Fairweather logo, and is available only through the promotion program, not for regular purchase.

As well, the company sometimes provides a gift with a minimum purchase, or offers a complementary item at cost (for example, buy coat, get scarf at half-price or buy dress, get accessories at half-price.)

‘I think we’ve seen a healthy increase in our business but, moreover, a healthy improvement in our consumers’ attitude towards Fairweather as being a company that offers something a bit different,’ Shore says.

While promotions can be seen to add value to a product, Rubinovich cautions the offer of a premium or incentive will not convince consumers to choose an inferior brand.

‘Between two brands that a consumer perceives as equal value, a premium may sway them, but it must be something the consumer wants,’ she says.

‘I don’t think premiums or incentives are ever a substitute for brand quality and advertising. A premium is really icing on the cake. And the cake’s got to be good before you put the icing on it.’